The art of taking multiple-choice-question tests and how to get the right answers.

College means something different to everyone, but those who consider it worthwhile would probably agree that grades are important. Tests are the biggest determinants of the final grade for common majors at most universities. More to the point, many tests are in multiple-choice form, which generally involves a set of questions with a handful of possible answers per question. I think someone out there could benefit from a comprehensive arsenal of tools to pick apart the multiple-choice test, so these are the quintessential guidelines.

By its nature, a test with 20 questions and 100 possible answers (20 correct ones) is surmountable, no matter what the content or material. We will look at test preparation as a function of the test. Therefore, each test should compel a unique approach.

If you knew the exam questions ahead of time, you could probably delimit the amount of material you had to study, so your first emphasis should be on the professor. It pays dividends to get a comfortable impression of the professor, who will in turn devise problems from his/her lectures. There are few stereotypical professors, but you will not quickly forget the type that assures you the exam will be taken verbatim from lecture content, which actually turns out to be useless on exam day. It is better to read the text thoroughly and attend no lectures than to memorize every lecture and leave the book in the condition you got it. However, even if that is the case, you will have a much better chance of scoring perfectly if you tap both resources.

Let us imagine an exam and discuss those approaches. Consider that the test has an answer key. The answer key is the scan-tron with the perfect maze of dark ovals; and, it is the scantron against which all the rest are compared. If there is a duplicate answer key, then someone has merely proven that it is possible to decode the information encrypted therein and shared among an elite group. Enough small talk, so in this scenario the exam will feature 48 questions, each with four choices. It would not be the same without real questions, so I am going to select five from an old exam. This is Econ 310, in case you are curious.

1) The bond markets are important because they are

a) easily the most widely followed financial markets in the United States.

b) the markets where foreign exchange rates are determined

c) the markets where interest rates are determined

d) the markets where all borrowers get their funds

In other words, the question could be why is the bond market important? Maybe A) is the answer, so our goal is to simplify the answer in the same manner. Words such as "easily" and "widely followed" are misplaced, because they are not objective. The only surefire way to steamroll an exam is to place all your confidence in the ones that epitomize objectivity; yes, you're right if you read that as there's no sure way, absent complete objectivity.

Now our answer choice is straightforward, because:

A) [The most followed financial markets in the United States] is a reasonably determinate choice.

See how the other answer choices have been redacted below.

B) [Where foreign exchange rates are determined]

C) [Where interest rates are determined]

D) [where all borrowers get their funds]

Which statement is a proper one about bond markets? If I guess blindly, I have a 25% chance of guessing correctly, but if I eliminate d), the probability becomes 33%. In fact, d) is a throwaway answer, because it uses a very unambiguous word, "all", which cannot be equivocal. If one borrower gets his/her funds elsewhere, the answer is rejected via proof by contradiction. Other than d), even a proud pedant cannot narrow down the answer choices further. Nevertheless, A) seems unlikely, since just because something is "widely followed", it is not necessarily, inherently important, here especially.

The correct answer choice is c), but it cannot be found through sheer common sense, since b) is in the same exact format, and both answer choices hinge on a single term. One must know what "foreign exchange rates" and "interest rates" are, in order to answer accurately. If a guess is taken now, it is as good a bet to be right as it is to be wrong, and if a person is leaning toward one choice on top of it all, it is "probably" the correct choice.

2) Money is defined as

A) bills of exchange

B) anything that is generally accepted in payment for goods and services or in the repayment of debt

C) a risk-free repository of spending power.

D) the unrecognized liability of governments

These answer choices are solidly put, in their original form, and an informed guess is not possible. Curiously though, one answer choice sticks out visually, because it is so instructive. The longest answer is the best answer, and b) is it.

3) Evidence from the United States and other foreign countries indicates that

a) there is a strong positive association between inflation and growth rate of money over long periods of time

b) there is little support for the assertion that "inflation is always and everywhere a monetary phenomenon."

c) countries with low monetary growth rates tend to experience higher rates of inflation, all else being constant

d) money growth is clearly unrelated to inflation

It is important to be analytical in answering this question. The revised answer choices follow, but they have been tweaked from a different angle

a) Money Growth:Definite inflation

b) Money Growth:Unclear relationship to inflation

c) Low Money Growth:Inflation

d) Money Growth:No relation to inflation

Look closely, and see that a) and d) are opposite choices. b) and c) are choices thrown in to confound the reader, and c), especially, will cause confusion, since many people are likely to infer something from the answer choice that is not true. Several variables can co-relate, so it is a mistake to assume that one is perfectly correlated to the other, as a consequence of spurious reasoning (e.g. when it rains, people hold very heavy umbrellas, so, when it drizzles, people ought to hold light umbrellas). From one intensity or extreme to intensity, extreme, or threshold level, there are additional effects that can be activated, causing inconsistencies and the implication of any false assumptions that depend on continuity.

a) and c) are also opposite answer choices because they both support a relationship, but one is a direct relationship, while the other is an inverse relationship. The one constant among all choice is "inflation", so it must be key to the educational value of the question. Although most correct answer choices avoid being theatrical in tone, it is hard to safely throw out b). It does contain absolute terms in the quotes, but those terms are qualified by the vague quantifier, "little." In effect, it is a relative answer choice and a very weak one. Multiple-choice tests cannot encompass a thorough review of the material, so key points are squeezed into the correct answers. The concise assertions are nearly always serious candidates for the correct answer. Those pointed answer choices are not just short in length, but they convey substantial information. Therefore, the long winding choices are used to define terms, but the short and pointed ones are usually more central to the conceptual objectives of the course. It may seem ironic, but the idea is to make students understand complex theory for some rudimentary ideas and expand on the notions that might seem obvious but really are not so, between the superficial perceptions of the terminology and the underlying applications.

Note that answer choice d) is a negative assertion. It seems suspicious then, as a plausible choice. How much sense does it make to devote very credible information in the incorrect answer choices, when, ostensibly, the goal is to declare something untrue? Not much.

b) and d) are less solid answer choices than a) and c). b) is actually a pretty convoluted choice, and very few questions will include reams of information to digest into intelligible information. Unfortunately, the hardest questions will be the ones that contain answer choices like b), and they are just not as easy to disentangle as other questions.

So far I have avoided appealing to common sense, but general knowledge cannot be neglected altogether.

4) Financial markets have the basic function of

a) getting people with funds to lend together with people who want to borrow funds

b) assuring that the swings in the business cycle are less pronounced

c) assuring that governments need never resort to printing money

d) providing a risk-free repository of spending power

Okay, c) is false. d) is a repetition of an answer choice in the second question. This is so important, you should remember nothing else, if you remember anything. Do not make needless mistakes. Do not choose d) in answer 2) and answer 4), unless you think financial markets have the basic function of providing money and money is the basic function provided by financial markets from connecting the corresponding questions. Correct grammar is not a trivial matter, and gibberish must not be a logical conclusion of different answer choices. Great, both c) and d) are nonsensical, and the answer is as good a guess as being right or wrong; these are always excellent odds.

5) Which of the following statements about financial markets and securities is true?

a) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants.

b) A debt instrument is intermediate term if its maturity is less than one year.

c) A debt instrument is intermediate term if its maturity is ten years or longer.

d) The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.

If the question is asking about financial markets and securities, how could a), an overview of just one security, be a sensible answer? It is the equivalent of asking about eggs and dairy and hearing about a brand of organic eggs. This answer is an easy one to eliminate, since it has no meaningful relationship to the question at hand. A bond is not "about financial markets and securities", even though bonds are sold in financial markets, and it is one type of security. There is no distributive property in the answer, because it is not saying anything about financial markets and securities and general. If no claim can be made about the general from the specific, then it is a responsible decision to discard the extraneous details. b) and c) are even more egregious answers, since the information pertains to intermediate term, which then refers to maturity, thereby causing the original question to appear poorly worded at best. Answer choice d) is best, purely because it is the most logical selection. "The" is an indefinite article, and in this case, it is referring to something that the reader should be able to figure out. Answers a) b) and c) (b & c especially), make little sense, and might be considered entirely self-referential.

The probability of getting five correct answers, implementing just logic and reason, is the product of the individual probabilities of getting each answer correct; and, to be sure, 2.06% (1/3*1/4*1/2*1/2*1) is better than 0.97% [(1/4)^5].

The odds of getting at least three correct answers are 25% (with care) vs. 10.35% (without looking at the questions).